The Dolphin project will set a new standard for the Gulf gas sector. (page 1 of 3)

By GERALD BUTT DOHA

Such a pioneering venture could only have been the product of imaginative thinking - and it takes quite a leap of imagination in the first place to see a connection between such a mundane and static object as a gas pipeline and the graceful and fluid movements of a dolphin. But never mind. Appropriate or not, Dolphin is the name, and last March an important agreement was signed to push the project towards eventual realization.
The occasion for the signing ceremony could not have been more appropriate. Delegates from all around the world were in the Qatari capital, Doha, for an international gas conference.

Opening the event, Qatar's energy minister, Abdallah al-Attiyah, spoke of how his country had become the leading exporter of liquefied natural gas (LNG) to the Far East, Europe, the United States and other destinations. "Despite the far reach of Qatar's LNG exports," he said, "we are hoping to be able soon to realize the dream of the Gulf region of building a pipeline network to secure the needs of our neighbors for gas and promote economic integration among its countries." As he was speaking, representatives of state-owned Qatar Petroleum (QQP) and Dolphin Energy Ltd. (DEL) - the company set up by UAE Offsets, the sponsors of the whole venture - were negotiating the final conditions of a term sheet agreement. This contains details of volumes, price and other matters for what the oil/gas business calls "the upstream" - the part of the project related to the exploration for and production of gas, and its processing onshore.

Finally, at a ceremony in Doha, the term sheet was signed. The occasion, one senior oil industry official said, introducing another metaphor into Dolphin-speak, was "the firing of the starting pistol" for the project. All being well, the term sheet will be converted into a production-sharing agreement between QP and DEL, scheduled to be signed before the end of September.
Included in the deal is the all-important element of price - how much DEL will pay for the natural gas that has been brought ashore at Ras Laffan from the North Field. The manner by which agreement on price was achieved is every bit as significant as the figure itself. In any commercial transaction - not least in the Gulf - the seller tries to hold out for as high a price as possible while the customer stands firm seeking a bargain. For months, QP and DEL could not agree on a basic sales price for North Field gas. In the end, a price was imposed on the two sides by political intervention of the highest level from Qatar and Abu Dhabi. The emir of Qatar and the ruler of Abu Dhabi decided that normal commercial considerations could no longer delay a scheme that was of huge benefit not only for the two parties involved but perhaps for the Gulf region as a whole.

Low prices. Qatar was initially unhappy at what it regarded as the low basic price that it would be paid for its gas. But under the deal Qatar will be compensated by receiving extra volumes of the valuable liquids (condensate) stripped from the gas. In the end, both sides said they could live with the agreement.
For the first time in the Gulf, then, political will forced the pace of economic cooperation. The implications for similar cross-border deals - not just for the sale of natural gas - are obvious. "It shows," a Western diplomat in Abu Dhabi said, "where there is a political will, there is an economic way."

The Dolphin project could eventually turn out to be a major Gulf triumph - but success depends also on the cooperation of two international strategic partners which are joint shareholders (each with a 24.5 percent stake in DEL, having paid the substantial fee of $25 million apiece for the privilege).